Financial Results Presentation Meeting on May 18, 2020 Q&A Summary Presenter Masahiro Minami, President and Representative Executive Officer, Resona Holdings, Inc. Q1. Please explain why you were appointed to take over from Mr. Higashi as president. Also, could you share your thoughts with regard to what the Board of Directors is expecting of you? A1. I believe Resona has to adapt to changes in the business environment. That’s the main reason why I was appointed. In addition to structural changes in society and the economy, we have seen the astonishing advance of digital and other technologies that will trigger radical changes, including in customer behavior, in the area of finance. Amid these circumstances, I believe that we must reexamine the strengths Resona has accumulated to date while promoting a transition to data-driven digital operations, that is, broadly speaking, the across-the-board digitalization of our businesses, with the aim of meeting the needs of the next generation. Q2. Please share your views on the issues Resona must tackle in the medium to long term going forward. Also, can you tell us your policies on addressing such issues? A2. I think the business environment is extremely harsh and the primary factor contributing to such an environment is, in my opinion, a substantial discrepancy between the current level of profit available to Resona and the cost structure the Company has maintained. Retail banking is, and has always been, an inherently high-cost endeavor. We must therefore bring together new ideas and technologies to change this structure. I discussed “the restructuring of five businesses” in my presentation, and the reform of our business structure is indeed a matter of critical importance. 1
In the short term, we are confident that by reinforcing our human resources in terms of quality and quantity and providing consultation services to Resona’s robust retail banking customer base we will secure greater profit in the field of business and asset succession. Also, we believe that it is quite rational and promising to provide the Resona Cashless Platform (RCP), commonly known as a “B to B to C” business, to our corporate customer base amid significant market changes happening in the settlement business. Therefore, Resona still has a lot of room for securing opportunities in this field via efforts to promote RCP. In the medium to long term, we will strive to integrate our face- to-face channel network, which consists of more than 800 branches in the Tokyo metropolitan and Kansai areas and supports Resona’s distinctive strengths, and digital channels that are expected to attract half a million customers over the next three years. This is a major task and requires a transition to data-driven operations. To accomplish this, we will transform the sales approach vis-à-vis face-to-face channels while simultaneously reducing costs. Furthermore, we will push ahead with operational process reforms aimed at ensuring all staff are capable of providing consulting services. I have also touched on the Cross Functional Team (CFT) we have launched. In addition to pursuing new services in our areas of strength, we must develop a new, solid business model from the ground up. Also, our digitalization initiatives include promoting the “API economy.” Specifically, we aim to act in collaboration with regional banks as well as external partners from other industries via the use of open platforms. In these ways, we will take on the challenge of seizing new profit opportunities. Q3. (Page 41 of the presentation material) As part of Resona’s capital management policies, the Company aims to secure a common equity tier 1 (CET1) ratio of approximately 10%. What are your assumptions with regard to the level of risk-weighted assets (RWAs)? Also, although the CET1 ratio target is set for March 31, 2023, why didn’t you specifically define the timeline for accomplishing a total shareholder return ratio target of in the mid-40% range, instead 2
merely stating that the Company aims to achieve it in “the medium term?” A3. Our assumption for total RWA in fiscal 2022 is just over ¥21 trillion. The targeted total shareholder return ratio of in the mid-40% range was set with consideration given to capital accumulation in the period since Resona completed the repayment of public funds five years ago. One of the issues is that we need to control the number of outstanding shares over the medium to long term, which will allow us to secure more flexibility regarding dividend payout. Although we cannot digitally define our timeline for achieving a target total shareholder return ratio, we expect that the ratio of in the mid-40% range will be achievable in the final year of the medium-term management plan, or shortly thereafter. Secondly, we must pay attention to the impact of the novel coronavirus pandemic, a major factor contributing to uncertainty. We assume that the spread of the virus will lose momentum and be contained by the end of the first half of fiscal 2020 while anticipating that there will be no major resurgence, or so-called “second wave.” Based on these assumptions, we will closely monitor the pandemic’s impact, the trajectory and pace of economic recovery and Resona’s profitability and financial soundness even as we maintain a proactive stance toward enhancing shareholder returns. Q4. (Page 28 of the presentation material) Asset succession is an area of growing need, and megabanks, regional banks, securities companies and other specialist firms are stepping up to get involved in this business. Amid this environment, could you describe the Resona Group’s competitive advantages in this field? Although your policy of reinforcing staff specializing in succession is understandable, do you have any other plans to carry out concrete measures aimed at securing greater profit? A4. Under the new medium-term management plan, the succession business is positioned as a driver for securing greater fee income. The Resona Group boasts a robust retail banking customer base, 3
consisting of 16 million individual customers and 500,000 corporate customers, as well as sophisticated, full-line trust banking capabilities, putting it in possession of the significant advantages arising from the combination of these two major assets. We aim to almost double the number of real estate and M&A deals from the current levels and will also allocate a significant number of additional staff to achieve this goal. The analysis of our latest data revealed that approximately half the potential transactional deals we handled did not reach closing. We will address this issue by reinforcing our human resources and striving to bring to closing the greatest possible number of potential deals. Q5. Resona’s roadmap for securing profit under the medium-term management plan seems to be based on the assumption that, in the post-pandemic period, cashless payment will gain in popularity. However, it can also be argued that stagnant consumption in the post- pandemic period may result in a deceleration in the current shift to cashless payment. What are your plans for securing new customers in B to C businesses and increasing the volume of transactions in said period? A5. There are a variety of opinions regarding the nature of the impact the pandemic will have on the popularization of cashless payment and on how swiftly this impact will be felt. Nevertheless, with regard to the settlement business, we anticipate significant progress in our initiatives to promote RCP, a platform we have already released. Even though the transaction amount being processed via RCP remains low to date, we believe that it should increase to approximately ¥1,500 billion going forward. This will, in turn, result in an approximately ¥5.0 billion increase in profit. Looking at individual customers, the amount of debit card transactions can also be significant. We anticipate that this, currently totaling ¥160.0 billion, will rise to nearly ¥300.0 billion. The annual number of new account openings totals approximately 500,000 on a consolidated basis, and we are providing each new customer with a 4
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